VMI ? ? ? ? ?  A Distribution channel operating system  Introduced in the USA in the early 1990s  System which is sweeping through many areas of retail  System which is practiced between manufacturer or middleman and a retailer  System in which inventory at distributer /retailer is monitored and managed by manufacturer/vendor  System which includes determining appropriate order quantities, managing proper product mix and configuring appropriate safety stock levels An article by Prof. Prabir Jana carried at Nottingham Trent University, UK

VMI Vs (TIM) Traditional inventory management  VMI is typically the opposite of the inventory management approach  VMI works in the reverse to link partners together and to grant authority to the partner who is in the best position to make inventory replenishment decisions.  VMI optimizes supply chain performance  VMI supplier has access to customer’s inventory data  VMI supplier is responsible for maintaining the inventory level required by the customer  The process is to resupply inventory by the vendor via scheduled reviews  VMI overall goal is to support total value chain cost minimization by pushing decision making on replenishment activities furthest up the supply chain. An article by Prof. Prabir Jana carried at Nottingham Trent University, UK

VMI Benefits Reduced inventory requirements Reduced costs Improved customer retention Binding Customers to Suppliers

Why VMI ???  To reduce/share cost of inventory  To reduce/share space requirement for inventory  To cut down response (procurement) time  To reduce/share uncertainty of type of merchandise requirement  To reduce/share uncertainty of quantity of merchandise requirement An article by Prof. Prabir Jana carried at Nottingham Trent University, UK

BENEFITS Lower inventory investment (raw and finished) Better scheduling and planning Better market information Closer customer ties and preferred status Lower inventory investment (raw and finished) Better scheduling and planning Better market information Closer customer ties and preferred status Fewer stock-outs with higher turnover Better market information More optimal product mixes Less inventory in channel (transfer costs) Lower administrative replenishment costs Fewer stock-outs with higher turnover Better market information More optimal product mixes Less inventory in channel (transfer costs) Lower administrative replenishment costs An article by Prof. Prabir Jana carried at Nottingham Trent University, UK MANUFACTURER

VMI Vs JIT  VMI can be looked as a step beyond Just in Time (JIT) in manufacturing scenario  In JIT vendor is supplying inventory to manufacturer Just in Time, whereas in VMI vendor is maintaining (means already supplied before time) inventory at manufacturer’s warehouse  In JIT pushes the effect of unpredictability upstream in supply chain  In VMI quality and quantity of merchandise are two very important parameters for VMI application in manufacturing An article by Prof. Prabir Jana carried at Nottingham Trent University, UK

VMI in Apparel manufacturing  Some of the potential areas of VMI application in apparel manufacturing are procurement of the consumables i.e.  Fabrics  Sewing thread  Sewing needle  Zippers  Sewing machine spare parts An article by Prof. Prabir Jana carried at Nottingham Trent University, UK

 For example practicing VMI between needle supplier and apparel manufacturer will have negligible cost and space saving to the manufacturer  VMI is also about accurate prediction of quality and quantity of merchandise by the vendor  While quality of merchandise (type of needle) can be easily predicted (certain), quantity (of needle) is uncertain and needs knowledgeable prediction by the needle vendor

Analysing different areas with VMI parameters An article by Prof. Prabir Jana carried at Nottingham Trent University, UK Areas Cost saving Space Saving Response (procurement) time Type of merchandise Qty of merchandi se Fabrics Substantial Uncertain Sewing thread Substantial UncertainCertain Zippers Substantial Certain Sewing Needle Negligible CertainUncertain Spare parts Negligible SubstantialUncertain

An article by Prof. Prabir Jana carried at Nottingham Trent University, UK

Areas Similarity with retail environment Disparity with retail environment Sewing Needle Like retail sales, companies those follow “break to replace” policy, sewing needle consumption (only quantity) pattern also can’t be predicted accurately Unlike retail sales the consumption (only type) pattern of sewing needle can be accurately predicted if company follow “fixed-life needle replacement” policy. Spare parts Like retail sales can’t be predicted with 100% accuracy, spare parts consumption (only quantity) pattern also can’t be predicted accurately for companies with “break to replace” policy. Unlike retail sales the consumption (only type) pattern of sewing machine parts can be accurately predicted if company follow good preventive maintenance policy An article by Prof. Prabir Jana carried at Nottingham Trent University, UK

VMI Case Studies in Apparel manufacturing in India An article by Prof. Prabir Jana carried at Nottingham Trent University, UK One apparel Manufacturer exporter from Bangalore wanted to experiment VMI concept The demand pattern (based on production schedule) was shared with thread manufacturer Thread supplier in consultation with apparel manufacturer calculated actual quantity of thread In the new concept the onus of surplus or shortage totally went to thread supplier

An article by Prof. Prabir Jana carried at Nottingham Trent University, UK 14 Somehow thread quantity calculation was never found to be accurate (with best of effort from both parties), Resulting thread supplier has to bear the cost of surplus thread Thread is perishable item so thread manufacturer withdraw from the arrangement The apparel manufacturer went on to have a risk sharing agreement with another thread supplier In the new risk sharing agreement

An article by Prof. Prabir Jana carried at Nottingham Trent University, UK One apparel manufacturer have an JIT (Just In Time) delivery arrangement with a thread supplier Under this arrangement Manufacturer block certain quantity of thread Thread inventory is maintained supplier’s premises Thread delivered Just-in-time (Only 8 hrs) Beyond certain period thread supplier is free to sell to other manufacturer

16 By this improvised arrangement An article by Prof. Prabir Jana carried at Nottingham Trent University, UK

17 Analysis An article by Prof. Prabir Jana carried at Nottingham Trent University, UK

18 Conclusion An article by Prof. Prabir Jana carried at Nottingham Trent University, UK